Saving for Your Child’s College Education

When you have young children and surplus cash, saving for college costs in advance may be your best option. Assume that you want to have enough money available to pay for your newborn child to attend community college for two years and then an in-state public university for two more years (and after that she’s on her own). Also, for this example, don’t assume any financial aid — at least not yet.

The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity. The College Board is a very robust Web site where you can obtain the current costs for the two institutions you’re considering.

Use The College Savings Calculation Worksheet provided here to calculate how much you need to save over what period of time to have the money available to fund college expenses for each child. You can go to College Board to find the most recent cost information for colleges and universities across the United States.

No financial aid has been factored into the calculations in this worksheet. You can use this worksheet to determine how much you need to save if you want to send your child to college and not take into consideration financial aid. Heck, your child may not qualify because you make so darn much money!

You may have heard a lot about the costs of a college education inflating 4 to 8 percent per year over the last 20 or 30 years. If you want, add an adjustment to offset the effects of inflation. The worksheet provided also does not account for any returns on your savings or investments for college. Based on historic inflation of college costs, it may be appropriate to presume that, at best, you achieve an after-tax return on your education funds equal to the inflation rate. In other words, whatever earnings your college savings accumulate after-tax will equal the increase in college costs.